According to the American College of Financial Services, there are 18 different risks that can threaten your financial plan during retirement. That is a daunting reality for those who are ready to retire.
At Branning Wealth, we recognize the future is unknowable and there is a great deal more to long-term retirement success than placing bets on the next hottest thing. Our goal is to help alleviate your uncertainty by creating your own personal pension and focusing on those retirement components you can control.
You may not be able to control the market, but you can control your personal expenses, your plan testing, your portfolio, your emotions and how much you pay to access the market.
Intentional budgeting improves retirement outcomes.
A well-designed retirement income plan is going to consider goals and long-term care needs, find strategies to reduce tax liability, and maximize resources such as Social Security. But properly classifying your expected and unexpected expenses may be the most important decision you make. This hierarchy of priority for expenses provides a framework for decision making to help use assets efficiently and effectively.
Once the distinction is made regarding expense type, the amount needed to fund your “base expenses” should be comprised of guaranteed income sources. These would include Social Security payments, pension payments, bond ladders, etc. This may not be as exciting as riding the waves of the market, but it helps decrease the risk of not having sufficient funds to meet your core lifetime needs.
The remaining “lifestyle expenses” are funded through growth of investment assets or other temporary income sources. Because they are somewhat optional expenses, there is room for them to be more coordinated with market performance.
Your retirement will never follow a spreadsheet.
Once you have established how much you will need during retirement, the projections will be calculated according to your inputs. Unfortunately, your retirement is never going to play out exactly like numbers on a spreadsheet. At Branning Wealth, we believe testing and simulation are necessary to help identify and prevent retirement pitfalls.
We start by using your projected spending needs and portfolio mix to perform a historical audit analysis. This assessment provides historical context to your investments by showing how the portfolio would have performed during every relevant rolling time-horizon going back to 1928. We apply our proprietary Critical Path evaluation to show when in the past your income plan would have been in the safety zone or danger zone.
Next our technology shows a probability of success by generating 1,000 potential return scenarios to illustrate potential paths of our client’s financial plan. We then collaborate with our clients to adjust the inputs of the current plan until the probability is at a rate everyone is comfortable with.
Our stress test analysis is also able to illustrate the impact of changes to several common factors including reduction in Social Security benefit, increases in taxes & inflation, market crashes and increased longevity. This tool helps calm fears and exposes areas of weakness which we can then address individually.
Let the markets work for you.
Once your plan has been developed and tested, both safety-first and growth investments must be coordinated with the income plan findings. We know that capital markets work over time and strongly believe in investing across the world to position our investors to capture returns wherever they occur. Our investment strategy combines this global diversification principle with employing asset classes in the manner they have best worked over time.
Research shows there is no reliable way to predict top performers. Attempting to better your returns through market timing or aggressive trading has even been tested academically and proven harmful to long term investors. Our evidence-based investment philosophy is rooted in research that dates back to before The Great Depression.
Stay disciplined – trust your plan.
A crucial component of long-term retirement success is separating emotions from investment decisions A disciplined investor does not react in fear when markets fall. They look beyond the concerns of today to the long-term growth potential markets can provide. Missing only a few days of strong returns can drastically impact overall performance.
Branning Wealth income plans have already incorporated these market declines into our strategy so that our clients do not need to panic when these moments occur.
Keep costs low.
With asset management fees, internal investment expenses, commissions and transaction costs, fees can eat away at your portfolio’s value over the long run. There can also be additional tax expense with high turnover investments. As fee-only fiduciaries, we conform to the highest standard of care for our clients. We are morally and legally required to act in the best interest of our clients at all times. We take that responsibility very seriously and are committed to transparency and saving our clients money.
Our Branning Wealth team designs strategic, data-driven solutions—entirely personalized to you. The ultimate goal of our safety-first approach is to find the most advantageous way to coordinate all resources and income needs with the least amount of risk so that our clients can live confidently during their retirement.